Dodge Company makes two products from a common input. Joint processing costs up to the split-off point total $44,800 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
-What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point?
A) $40,000
B) $23,500
C) $18,200
D) $45,300

Question

Quizplus · Accepted Answer

To determine the minimum amount the company should accept for Product X if sold at the split-off point, we need to use the sales value at split-off point ratio for Product X: 8,000 / (8,000 + 12,000) = 0.4. Multiplying this ratio by the joint processing costs: 0.4 x $44,800 = $17,920. Therefore, the minimum amount the company should accept for Product X is $23,500 ($17,920 + $5,580). Product X should be processed further to maximize profit.

Dodge Company Makes Two Products from a Common Input